Notice-2018-14 & Pub. 15: Guidance on Withholding Rules

IRS Statement - Notice 2018-14

The Treasury Department and the Internal Revenue Service (IRS) released additional withholding guidance (Notice 2018-14) to implement the Tax Cuts and Jobs Act. This guidance is designed to help both employers and employees with various withholding issues, such as claiming an exemption from withholding, modifying withholding after a change in status that affects withholding, and the rate for withholding on bonus payments.

The guidance provides that employees may continue to use the 2017 Form W-4 to claim an exemption from federal income tax withholding until 30 days after the 2018 version of the form is released. The guidance also temporarily waives the rule that requires employees to furnish revised Forms W-4 to their employers within 10 days after a change in status that reduces the number of withholding allowances they can claim.

As the IRS announced earlier this year, a new withholding calculator is expected to be available by the end of February to help individuals identify the correct amount of withholding. Treasury and the IRS encourage employees to use the calculator once it is released to update their withholding information as appropriate.

Notice 2018-14: 1) extends the effective period of Forms W-4 furnished to claim exemption from income tax withholding under § 3402(n) for 2017 until February 28, 2018 and temporarily permits employees to claim exemption from withholding under § 3402(n) for 2018 by using 2017 Form W-4, (2) suspends the requirement that employees must furnish their employers new Forms W-4 within 10 days of changes of status resulting in fewer withholding allowances, (3) provides that the optional withholding rate on supplemental wage payments is 22% for taxable years 2018 through 2025, and (4) provides that, for 2018, withholding on annuities or similar periodic payments where no withholding certificate is in effect is based on treating the payee as a married individual claiming three withholding allowances under § 3405(a)(4).

IRS Statement - Pub 15

The IRS released today Publication 15 (Circular E) , Employer’s Tax Guide. Tax legislation passed in December replaced federal individual income tax rates with new, reduced rates. This publication will help employers transition to the new rates. It is one of a series of steps the IRS will take to help employers apply the new law.